Postcards from Recovery Summer

Brian Hicks

Updated August 15, 2010

Welcome to the Wealth Daily Weekend Edition — our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles.

I don’t know about you… but this has been an exhausting “Recovery Summer”.

With new housing sales weakening, sales of existing homes plunging, and the end of the $8,000 homebuyer incentive, I don’t know how much more recovery I can take. Consumer confidence is in the toilet (sits at 50.4 in July from 54.3 in June). Unemployment is now closer to 20% than 10%. Savings accounts have vanished. Household debt has piled up. And it’s been awfully hot outside.

Unfortunately, Recovery Summer is almost over… and I can hardly wait for the next one.

And it seems neither can President Obama, who still claims we’re recovering. But he wouldn’t know about “fact spinning,” opting instead to tout that the stimulus passed in February 2009 created or saved 3.5 million jobs, would he? “The stimulus bill prevented the unemployment rate from getting up to… 15%,” he says. (But that number doesn’t include those that gave up looking for work… so it’s probably closer to 20%.)

Unfortunately, just one look at this chart and you can see just how “good” our “jobs recovery” really is.


unemployment chart

You see, for us to believe in Obama’s recovery, we would need to see some improvement in our economic foundation.

And it’s just not there… 

President Obama can tell us we’re recovering until he’s blue in the face.

DC bureaucrats can brag about how “we only lost 131,000 jobs this month,” as though they deserve to be thanked… until their jaws pop off. But let’s be real. What are they excited about?

jobs chart 081310

And Abby Joseph Cohen can think the worst is priced in, that the recovery is on track… until Christmas 2012.

But they’re all wrong… and we knew that. So, we recommended the VXX play two weeks ago and waited… knowing it was only a matter of time before Wall Street woke-up, and allowed fear and volatility to creep back in.

The truth is — here on Main Street — very few believe that the economy is improving. That job growth is coming… much like that comet that’s supposed to hit us in 130 years. 

For crying out loud, even CNN and the New York Times are admitting that we don’t just face a double dip recession, but another Great Depression. And for CNN and the New York Times admit to that… means it’s time to run.

Even Christina Romer, chairwoman of the White House Council of Economic Advisers, seems to have enough of the White House bullishness, choosing to see past the bologna. She quit a day before the unemployment report showed another 131,000 jobs had been lost… and before the downwardly revised previous two months.  

Then again, I’d leave, too… if my 2009 report “The Job Impact of the American Recovery and Reinvestment Act” was embarrassingly wrong

Remember — it was that very report that got Americans believing a $862 billion stimulus bill would help unemployment levels stay below eight percent last year and hit seven percent… around now. But that stimulus was nothing more than a waste of money that has created no jobs, economic growth, or really… much of anything, but a drain on Americans’ much-needed cash.

Even Ben Bernanke — who also thinks we’re recovering — downgraded the Fed’s view of the economy. And in walked the fear we were waiting for… down came the markets… and up went the VIX and VXX.

It’s not as if his July 22 “unusual uncertainty” comments helped much. But he was just being honest. Who knows what’ll happen to our economy with these issues:

  • The end of the Bush tax cuts, which, if cut — according to Christina Romer — could reduce GDP
  • The cost of ObamaCare
  • The future of energy costs… with the deep-water moratorium and cap and trade issues
  • And the future of lending

Ahhhh… Recovery Summer 2010 was just great. I’ve never felt so relaxed.  

Now if we could just get Bernanke to leave with Romer…

The Fed has missed one disaster after another. I don’t have the space to list them here… but they missed a lot.

And now Bernanke wants us to believe: “The worst of the financial crisis is behind the nation and the economy is growing again”?

It’s just not true. He’s missing the big picture again.

Americans are struggling with unemployment (closer to 20% than 10%). Foreclosures are mounting (and will spike from Option ARM resets and failing government programs). Savings accounts have been crushed. Housing will soon double dip. And consumer confidence is plunging.

And while the idea of replacing maturing mortgage-backed securities with U.S. Treasury Bonds of 2 to 10 year maturities sounds nice, it won’t have much of the type of economic impact we need.  

The Fed even downgraded its view of the economy… and left us without clarity, certainty, or predictability of what comes next. It’s no wonder the Dow sold off after the Fed spoke. Investors are now faced with more uncertainty… which breeds more fear and volatility — the very two reasons we bought the VXX trade in the first place.

But here’s the good news… as that expected fear came roaring back, so did the VXX trade.  

VXX chart 081210

And you’re still in luck.

The VIX is likely to jump even more… ultimately sending our VXX trade higher.

But while we recommend holding the VXX trade… don’t put all your eggs in one basket.

Here are some other ways to profit in this market… from the very pages of this week’s top-read articles in Wealth Daily and our sister publication, Energy and Capital.

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Three Upcoming U.S. Oil Stocks: What the EIA Won’t Tell You About U.S. Oil Production
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The Nuclear Story Fox Isn’t Telling: They Only Reported the Facts… Here’s the Rest
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Nuclear Powered Desalination: Nuclear Desalination: 80% Cheaper
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Why The Gold Bears are Wrong: Debunking the faulty logic employed by gold haters
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700% Gains in Just Weeks: How a Mongolian Oil Company Could Show enormous Potential
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Stem Cell Stocks: Geron Corp. (Nasdaq:GERN): Geron: Tracking Down the Next Medical Milestone
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Most people think profiting from options requires years of investment experience or a seasoned stock broker. That’s why people are losing thousands of dollars everyday. Our in-house options expert has put together a FREE guide detailing an options strategy that’s so easy, he’s calling them “automatic options.” You’ve got to check this out… and not just for the free trade.

Investing in Frontier Market Stocks: Seek Value – Buy Growth in Frontier Markets
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